When a tenant is in breach of a covenant in the lease, his
landlord may have a right to forfeit that lease. The landlord has,
however, the option to waive that right to forfeit and that
election may be express or implied. A demand for or acceptance of
rent will generally be sufficient to show that right has been
waived even if the landlord had no intention of waiving the
right.
A recent Court of Appeal decision has looked at the position where
a landlord, in full knowledge of the tenant's breach of
covenant, accepted a cheque from the tenant that included both a
sum owed to the landlord under bankruptcy proceedings and part
payment for arrears of rent. The landlord's solicitors banked
the cheque, retained the bankruptcy payment and returned the
element of the payment representing the rent arrears. In the
covering letter returning the rent the solicitors stated that the
clearance of the cheque should not be regarded as a waiver by the
landlord of his right to forfeit the lease. Had the landlord waived
his right to forfeit?
The Court of Appeal held that he had not. The processing of the cheque was not conclusive and for waiver to take place the payment had to be accepted by the landlord specifically as rent. There was no other way for the landlord to receive payment for the bankruptcy debt without banking the cheque and returning the element that represented the rent. The court made clear that it was important to introduce the test of an objective observer. Such an observer would have no grounds for supposing that the amount repaid had been accepted by the landlord as rent.
Clearly the right decision in the particular circumstances. Landlord's should, however, remain careful about what they do in order to ensure that they do not waive the right to forfeit.
Law: Seahive Investments Ltd –v- Osibanjo [2008] EWCA Civ 1282
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 01/12/2008.
